The Burrill Report


Much has been made in recent years about Big Pharma’s problems with R&D productivity. As the cost of drug development soared to as much as $1.5 billion by some estimates and development times grew, the output of new approved drugs remained relatively stable.

Over the last several years Big Pharma has been undergoing a reinvention of its research and development. Companies have sought to narrow their focus into key disease areas, become more entrepreneurial by letting R&D groups act with greater autonomy to act like smaller biotechs, focus on unmet medical needs and orphan indications, and tap into a broad range of external sources of innovation that might be better than their internal discovery engines.

Last year the U.S. surge in new drug approvals from the U.S. Food and Drug Administration got a lot of attention, but it seemed premature to read that as any kind of long-term sign that the broken machinery had been fixed. In fact, new drugs launched by the world’s largest pharmaceutical companies globally actually fell in 2012. This year, FDA approvals of new drugs year-to-date is down (18 in 2013 vs. 26 2012). Depending on how the government shutdown plays out, the industry will struggle to meet recent average yearly approval rates of around 27 new drugs by the end of the year.

But there are some signs of life. Two charts contained in the newly released Thomson Reuters 2013 CMR International Pharmaceutical Factbook should offer hope about improving R&D productivity. The data is drawn mostly from the largest drug companies—those that spend at least $1 billion a year on R&D.

Cycle times from discovery to launch dropped from a peak of around 15 years in 2010 to 12.3 years, reversing a long-term trend.



At the same time, success rates for experimental drugs by phase tells an encouraging story. Experimental drugs in preclinical, phase 1, and phase 2 have seen a decline in success rates over these two periods while there has been an increase in the success rates of experimental drugs in phase 3 and in regulatory review. That indicates that companies are identifying failures earlier and not spending as much on late-stage trials for drugs that will blow up in the clinic. 

 

The Factbook didn’t offer any specifics on cost, but Phil Miller, solutions director, clinical practice & consulting at Thomson Reuters, says since the cost of failure is calculated into the overall cost of new drugs, and the time savings is coming in the clinical portion of development where costs are highest, this is a good indicator that cost productivity is increasing.

Miller says the improvements are not so much the result of regulatory changes, new technology, or old fashioned smarts, but because drug companies are putting a greater effort into developing drugs for unmet medical needs and orphan indications. “Mostly it’s a change in the pipeline,” says Miller. “It’s reasonable to assume that clinical times go faster because we are looking at these drugs in niche areas—smaller clinical trials where you might be able to skip a phase—you might be able to run a smaller number of trials overall, which is going to make you faster.”

Consider Voraxaze, BTG’s treatment for patients with toxic levels of methotrexate in their blood due to kidney failure, approved in 2012. Miller notes the FDA approved the drug on the basis of a single study that involved just 22 patients.

Big Pharma still has issues to work through. Just this week Sanofi CEO Chris Viehbacher said Sanofi would return to growth in the fourth quarter of this year—a company that faced the steepest patent cliff losing protection on nine drugs in three years. But as the industry moves beyond the worst of the patent cliff, Miller says it’s unlikely that new drugs will generate enough revenue anytime soon to replace the revenue the industry lost when its biggest blockbusters faced competition from generics.

And while Big Pharma continues to cut headcount and remake R&D—such as Merck’s latest overhaul involving an additional loss of 8,500 jobs announced this month—Miller says he’s not so sure that new drugs, even with high reimbursement rates, will be able to replace what companies have lost to patent expirations. There’s also some question of whether the focus on orphan indications is a sustainable strategy, particular in the face of growing concerns about the Orphan Drug Act being abused.

“There are some green shoots growing here, but it’s not unequivocal that pharma’s bounced back. If you look at press releases from pharma where they are still cutting heads quite deeply, they are still feeling the pinch,” says Miller. “We need another couple of years of data to say whether it’s a trend or not. It looks that way, but there’s not enough data to hang your hat on and say pharma’s turned the corner on productivity and everything in the garden is rosey.”

October 10, 2013
http://www.burrillreport.com/article-green_shoots_of_productivity.html